There's a lot of political talk about the need to boost domestic energy production, not to mention a desire for more jobs to be created. Unfortunately, the reality too often points to government policies creating obstacles to, or outright stopping such development. That has been the case, for example, when it comes to oil and natural gas development in the Gulf of Mexico.
Consider the findings from a new study ("United States Gulf of Mexico Oil and Natural Gas Industry Economic Impact Analysis") conducted by Quest Offshore for the American Petroleum Institute (API) and the National Ocean Industries Association.
The study points out that, in 2010, "over 30 percent of the oil and 11 percent of the natural gas produced in the United States was produced in the Gulf of Mexico (GoM)." However, from 2008 to 2010, capital expenditures and operational spending by the oil and natural gas industry in the Gulf fell due to the recession, along with "the establishment of a moratorium on deepwater drilling and subsequent slowdown of permit issuance in both GoM deep and shallow waters in 2010 and into 2011."
The study estimates "the near term potential of the offshore GoM oil and natural gas industry to create jobs, boost GDP and generate tax revenues at all levels of government - if the government pursues a balanced regulatory approach that allows for the timely development of the backlog of GoM projects in an environmentally responsible manner."
If offshore activity returned to the levels before the Obama moratorium, the Quest study points to:
• Total domestic spending levels would rise from the 2010 level of $24.2 billion to $41.4 billion by 2013, a 71 percent increase, and capital expenditures up by 141 percent by 2013 to reach $15.7 billion.
• "Total contribution to U.S. GDP is expected to reach $44.5 billion by 2013, a 70% increase over the 2010 level."
• As for jobs: "In 2013, employment is projected to reach its highest level in the study period at 430 thousand jobs which is a 20 percent increase on the 2012 level and a 77 percent increase over the 2010 level."
API President and CEO Jack Gerard summed up: "The slow pace of Gulf development since the accident has cost jobs, revenue and energy production. The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We've done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever."
From a small business perspective, the benefits from getting back to a balanced, pro-development policy stance on offshore drilling would mean a more affordable and reliable energy supply, and increased opportunity for small firms within and those serving the energy sector.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.